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NewLake Capital Partners Reports Third Quarter 2022 Financial Results

Third Quarter 2022 Revenue Totaled $12.1 Million, an Increase of 50% Year-Over-Year

Third Quarter 2022 Net Income Attributable to Common Stockholders and Participating Securities totaled $6.5 Million FFO totaled $10.3 Million, and AFFO totaled $10.6 Million

Conference Call and Webcast Scheduled for November 10, 2022, at 10a.m. Eastern Time

NEW CANAAN, Conn., Nov. 09, 2022 (GLOBE NEWSWIRE) -- NewLake Capital Partners, Inc. (OCTQX: NLCP) (the “Company” or “NewLake”), a leading provider of real estate capital to state-licensed cannabis operators, today announced its financial results for the third quarter ended September 30, 2022.

Anthony Coniglio, President and Chief Executive Officer, said, “We are very pleased with our third quarter results and the strength of our business. We announced our sixth straight quarterly dividend increase and delivered significant year-over-year growth with AFFO up 75% from Q3 2021. While our pipeline of quality cannabis properties remains robust, we can no longer ignore the compelling investment opportunity with our stock trading at such a discount. We have initiated a stock repurchase program demonstrating our strong conviction in the quality of our portfolio and the long term value of our Company.”

Third Quarter 2022 Financial Highlights
Comparison to the second quarter ended June 30, 2022:

  • Revenue totaled $12.1 million as compared to $10.5 million, an increase of 15.0% from the prior quarter.
  • Net income attributable to common stockholders and participating securities totaled $6.5 million, as compared to $3.8 million(1).
  • Funds from operations-diluted(2) (“FFO”) totaled $10.3 million, as compared to $6.6 million(1).
  • Adjusted funds from operations-diluted(2) (“AFFO”) totaled $10.6 million compared to $8.8 million, an increase of 21.4% from the prior quarter.
  • Cash and cash equivalents as of September 30, 2022, were $45.0 million, with $4.8 million committed(3) to fund tenant improvements.

Comparison to the third quarter ended September 30, 2021:

  • Revenue totaled $12.1 million as compared to $8.0 million, an increase of 50.0% year-over-year.
  • Net income attributable to common stockholders and participating securities totaled $6.5 million, as compared to $2.7 million.
  • FFO totaled $10.3 million, as compared to $5.2 million.
  • AFFO totaled $10.6 million compared to $6.1 million, an increase of 75.3% year-over-year.

Nine Months Ended September 30, 2022 Financial Highlights
Comparison to the nine months ended September 30, 2021

  • Revenue totaled $32.6 as compared to $19.1 million, an increase of 70.9% year over year.
  • Net income attributable to common stockholders and participating securities totaled $15.3 million, as compared to $6.9 million.
  • FFO totaled $24.7 million, as compared to $12.7 million.
  • AFFO totaled $27.8 million compared to $14.6 million, an increase of 90.9% year-over-year.

Operational Highlights and Subsequent Events

  • For the nine months ended September 30, 2022, the Company invested $65.4 million to acquire four cultivation facilities and funded $43.5 million of tenant improvements (“TI”) across seven properties.
  • On November 3, 2022, the Company purchased a $1.6 million dispensary in Ohio.
  • On November 7, 2022, the Board of Directors of the Company authorized a share repurchase program of its common stock up to $10 million through December 31, 2023. _________________________________________________________________________________

(1) Net income and FFO for the second quarter of 2022 were impacted by one-time severance costs of $1.6 million in connection with certain executive officer separation agreements, which were contemplated as part of a succession plan at the time of the Company merger.
(2) In the third quarter FFO diluted and AFFO diluted is calculated and presented on a fully diluted basis and comparative prior period balances for FFO and AFFO were calculated to conform to the third quarters presentation.
(3) Does not include the option to purchase an adjacent parcel for $16.5 million since there is no obligation for the Company to fund the additional purchase or $2.7 million of commitments because the company was released from its' obligation to fund the TI subsequent to September 30, 2022.

Investment Activity

On a sequential basis, total revenue increased 15.0% from the second quarter of 2022 as the Company invested $4.7 million to fund tenant improvements during the third quarter. Also, the Company recognized a full quarter of revenue from the $20.1 million Curaleaf expansion funded in mid-June and the two AYR Strategies cultivation facilities acquired on June 30, 2022.

The following tables present the Company's investment activity for three months ended September 30, 2022 (dollars in thousands).

Acquisitions

                   
Tenant   Market   Site Type   Closing Date   Acquisitions  
Calypso Enterprises   Pennsylvania   Cultivation   August 5, 2022   $ 30,000 (1)
                   
Total               $ 30,000  
                   
(1) Converted from a mortgage loan to a 20-year sale-leaseback on August 5, 2022, in accordance with the loan agreement.      

Tenant Improvements Funded

 
Tenant   Market   Site Type   Closing Date   TI Funded   Unfunded Commitments (1)  
Mint   Arizona   Cultivation   June 24, 2021     3,400     3,063  
Organic Remedies   Missouri   Cultivation   December 20, 2021     475     282  
Bloom Medicinal   Missouri   Cultivation   April 1, 2022     852     752  
Ayr Wellness, Inc.   Pennsylvania   Cultivation   June 30, 2022         750  
Total   $ 4,727   $ 4,847  
                       
                       
(1) Does not include a $16.5 million option to acquire an adjacent property from an existing tenant since there is no obligation to fund the purchase or $2.7 million of commitments because the company was released from its' obligation to fund the TI subsequent to September 30, 2022.

Financing Activity

Revolving Credit Facility

On May 6, 2022 the Company's Operating Partnership entered into a loan and security agreement (the "Loan and Security Agreement") with a commercial federally regulated bank, as a lender and as agent for lenders that become party thereto from time to time. The Loan and Security Agreement matures on May 6, 2027. The Revolving Credit Facility had an initial commitment of $30.0 million which is secured by a borrowing base consisting of fee simple owned real properties that satisfy eligibility criteria specified in the loan agreement. On July 29, 2022, the Operating Partnership entered into an amendment to the Loan and Security Agreement which increased the aggregate commitment under the Revolving Credit Facility to $90.0 million and added two additional lenders. The Company, subject to certain conditions, has the ability to request additional revolving loan commitments which may increase the total aggregate principal amount of the Revolving Credit Facility to up to $100.0 million. Borrowings under the Revolving Credit Facility may be voluntarily prepaid and re-borrowed and bears a fixed rate of 5.65% for the first three years and thereafter a variable rate based upon the greater of (a) the Prime Rate quoted in the Wall Street Journal (Western Edition) (“Base Rate”) plus an applicable margin of 1.00% or (b) 4.75%. The outstanding borrowings under the Revolving Credit Facility was $1.0 million as of September 30, 2022.

The facility is subject to certain liquidity and operating covenants and includes customary representations and warranties, affirmative and negative covenants and events of default. As of September 30, 2022, the Company is compliant with the covenants of the agreement.

Seller Financing

In connection with the purchase and leaseback of a cultivation facility in Chaffee, Missouri on December 20, 2021, the Company entered into a $3.8 million loan payable to the seller, which is an independent third party from the tenant. The loan bears interest at a rate of 4.00% per annum. Principal payments on the loan are payable in annual installments of which $1.8 million was paid in January 2022. The remaining principal payments are due in annual installments of $1.0 million and $1.0 million in January 2023 and 2024, respectively. The loan's outstanding balance as of September 30, 2022 was $2.0 million.

Stock Repurchase Program

On November 7, 2022, the Board of Directors of the Company authorized a stock repurchase program of its common stock up to $10 million through December 31, 2023. Purchases made pursuant to the stock repurchase program will be made in the open market, in privately negotiated transactions, or pursuant to any trading plan that may be adopted in accordance with Rule 10b-18 of the Securities and Exchange Act of 1934, as amended. The authorization of the stock repurchase program does not obligate the Company to acquire any particular amount of common stock. The timing, manner, price and amount of any repurchases will be determined by the Company in its discretion and will be subject to economic and market conditions, stock price, applicable legal requirements and other factors. The stock repurchase program may be suspended or discontinued by us at any time and without prior notice. The Company has not, as of the date hereof, repurchased any shares of common stock under the the stock repurchase program.

Dividend

On September 15, 2022, the Company declared a third quarter 2022 cash dividend of $0.37 per share of common stock, equivalent to an annualized dividend of $1.48 per share of common stock. The dividend was paid on October 14, 2022 to stockholders of record at the close of business on September 30, 2022.

Conference Call and Webcast Details:
Management will host a conference call and webcast at 10:00 a.m. Eastern Time on November 10, 2022 to discuss its quarterly financial results and answer questions about the Company's operational and financial highlights for the third quarter ended September 30, 2022.

Event: NewLake Capital Partners Inc. Third Quarter 2022 Earnings Call
Date: Thursday, November 10, 2022
Time: 10:00 a.m. Eastern Time
Live Call: 1-888-254-3590 (U.S. Toll-Free) or +1-929-477-0448 (International)
Webcast: https://viavid.webcasts.com/starthere.jsp?ei=1577693&tp_key=2c833cb7a9 

For interested individuals unable to join the conference call, a dial-in replay of the call will be available until November 24, 2022 and can be accessed by dialing +1-844-512-2921 (U.S. Toll Free) or +1-412-317-6671 (International) and entering replay pin number: 3325614.

About NewLake Capital Partners, Inc.
NewLake Capital Partners, Inc. is an internally-managed real estate investment trust that provides real estate capital to state-licensed cannabis operators through sale-leaseback transactions and third-party purchases and funding for build-to-suit projects. NewLake owns a portfolio of 32 cultivation facilities and dispensaries that are leased to single tenants on a triple-net basis. For more information, please visit www.newlake.com

Forward-Looking Statements
This press release contains “forward-looking statements.” Forward-looking statements can be identified by words like “may,” “will,” “likely,” “should,” “expect,” “anticipate,” “future,” “plan,” “believe,” “intend,” “goal,” “project,” “continue” and similar expressions. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs and expectations. Forward-looking statements are based on the Company’s current expectations and assumptions regarding capital market conditions, the Company’s business, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results may differ materially from those indicated in the forward-looking statements. Therefore, you should not rely on any of these forward-looking statements For a discussion of the risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in our most recent Annual Report on Form 10-K and any subsequent Quarterly Reports on Form 10-Q. The Company does not undertake, and specifically disclaims any obligation, to publicly release the result of any revisions which may be made to any forward-looking statements to reflect the occurrence of anticipated or unanticipated events or circumstances after the date of such statements, except as required by law.

Use of Non-GAAP Financial Information

FFO and AFFO are supplemental non-GAAP financial measures used in the real estate industry to measure and compare the operating performance of real estate companies. A complete reconciliation containing adjustments from GAAP net income attributable to common stockholders to FFO and AFFO and definitions of terms are included at the end of this release.

Contact Information:
Lisa Meyer
Chief Financial Officer, Treasurer and Secretary
NewLake Capital Partners, Inc.
lmeyer@newlake.com 

Investor Contact:
Valter Pinto, Managing Director
KCSA Strategic Communications
Valter@KCSA.com 
PH: (212) 896-1254

Media Contact:
McKenna Miller
KCSA Strategic Communications
MMiller@KCSA.com 
PH: (212) 896-1254

NEWLAKE CAPITAL PARTNERS, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share amounts)

  September 30, 2022   December 31, 2021
Assets: (Unaudited)   (Audited)
       
Real Estate      
Land $ 21,146     $ 15,649  
Building and Improvements   375,051       272,432  
Total Real Estate   396,197       288,081  
Less Accumulated Depreciation   (16,757 )     (9,155 )
Net Real Estate   379,440       278,926  
Cash and Cash Equivalents   45,023       127,097  
Loans Receivable   5,000       30,000  
In-Place Lease Intangible Assets, net   22,492       24,002  
Other Assets   2,667       858  
       
Total Assets $ 454,622     $ 460,883  
       
Liabilities and Equity:      
       
Liabilities:      
       
Accounts Payable and Accrued Expenses $ 1,967     $ 1,404  
Revolving Credit Facility   1,000        
Loan Payable, net   1,980       3,759  
Dividends and Distributions Payable   8,064       6,765  
Security Deposits Payable   7,310       6,047  
Interest Reserve         2,144  
Rent Received in Advance   862       1,429  
Other Liabilities   276        
       
Total Liabilities   21,459       21,548  
       
Commitments and Contingencies      
       
Equity:      
       
Preferred Stock, $0.01 Par Value, 100,000,000 Shares Authorized, Preferred Stock, 0 and 0 Shares Issued and Outstanding, Respectively          
Common Stock, $0.01 Par Value, 400,000,000 Shares Authorized, 21,403,817 and 21,235,914 Shares Issued and Outstanding, Respectively   214       213  
Additional Paid-In Capital   456,352       450,916  
Accumulated Deficit   (30,811 )     (23,574 )
       
Total Stockholders' Equity   425,755       427,555  
       
Noncontrolling Interests   7,408       11,780  
       
Total Equity   433,163       439,335  
       
Total Liabilities and Equity $ 454,622     $ 460,883  


NEWLAKE CAPITAL PARTNERS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except share and per share amounts)

  For the Three Months Ended   For the Nine Months Ended
  September 30,   September 30,
    2022       2021       2022       2021  
Revenue:              
               
Rental Income $ 11,639     $ 8,048     $ 30,317     $ 19,083  
Interest Income from Loans   434             2,301        
               
Total Revenue   12,073       8,048       32,618       19,083  
               
Expenses:              
               
Depreciation and Amortization Expense   3,630       2,464       9,113       5,601  
General and Administrative Expenses:              
Compensation expense   760       805       3,898       2,209  
Stock-Based Compensation   280       816       1,201       1,820  
Professional fees   279       574       1,486       1,351  
Other general and administrative expenses   414       631       1,249       1,009  
Total general and administrative expenses   1,733       2,826       7,834       6,389  
               
Total Expenses   5,363       5,290       16,947       11,990  
               
Loss on Sale of Real Estate               (60 )      
               
Income From Operations   6,710       2,758       15,611       7,093  
               
Other Income (Expenses):              
Interest Income   7       21       103       40  
Interest Expense   (94 )           (167 )      
               
Total Other Income (Expense)   (87 )     21       (64 )     40  
               
Net Income   6,623       2,779       15,547       7,133  
               
Preferred Stock Dividends                     (4 )
               
Net Income Attributable to Noncontrolling Interests   (113 )     (82 )     (262 )     (236 )
               
Net Income Attributable to Common Stockholders and Participating Securities $ 6,510     $ 2,697     $ 15,285     $ 6,893  
               
Net Income per Common Share - Basic $ 0.30     $ 0.14     $ 0.71     $ 0.44  
               
Net Income per Common Share - Diluted $ 0.30     $ 0.14     $ 0.71     $ 0.44  
               
Weighted Average Shares of Common Stock Outstanding - Basic   21,428,905       19,410,307       21,417,149       15,588,544  
               
Weighted Average Shares of Common Stock Outstanding - Diluted   21,802,487       19,555,867       21,815,763       15,637,064  

Non-GAAP Financial Information

Funds From Operations

The Company calculates FFO in accordance with the current National Association of Real Estate Investment Trusts (“NAREIT”) definition. NAREIT currently defines FFO as follows: net income (loss) (computed in accordance with GAAP) excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by an entity. Other REITs may not define FFO in accordance with the NAREIT definition or may interpret the current NAREIT definition differently and therefore the Company’s computation of FFO may not be comparable to such other REITs.

Adjusted Funds From Operations

The Company calculates AFFO by starting with FFO and adding back non-cash and certain non-recurring transactions, including non-cash components of compensation expense. Other REITs may not define AFFO in the same manner and therefore the Company’s calculation of AFFO may not be comparable to such other REITs. You should not consider FFO and AFFO to be alternatives to net income as a reliable measure of our operating performance; nor should you consider FFO and AFFO to be alternatives to cash flows from operating, investing or financing activities (as defined by GAAP) as measures of liquidity.

The table below is a reconciliation of net income attributable to common stockholders to FFO and AFFO for the three and nine months ended September 30, 2022 and 2021 (in thousands, except share and per share amounts):

  Three Months Ended September 30, 2022   Nine Months Ended September 30, 2022
    2022     2021     2022     2021
               
Net income attributable to common stockholders and participating securities $ 6,510   $ 2,697   $ 15,285   $ 6,893
Net income attributable to noncontrolling interests   113     82     262     236
Net income attributable to common stockholders - diluted   6,623     2,779     15,547     7,129
Adjustments:              
Real estate depreciation and amortization   3,630     2,464     9,113     5,601
Loss on sale of real estate           60    
FFO attributable to common stockholders - diluted (1)   10,253     5,243     24,720     12,730
Severance   25         1,752    
Stock- based compensation   280     816     1,201     1,820
Non-cash interest expense   59         92    
Amortization of straight-line rent expense   6         12    
AFFO attributable to common stockholders - diluted(2) $ 10,623   $ 6,059   $ 27,777   $ 14,550
               
FFO per share - diluted $ 0.47   $ 0.27   $ 1.13   $ 0.81
AFFO per share - diluted $ 0.49   $ 0.31   $ 1.27   $ 0.93
               

(1) In the third quarter FFO diluted and AFFO diluted is calculated and presented on a fully diluted basis and comparative prior period balances for FFO and AFFO were calculated to conform to the third quarters presentation.


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